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BOK expected to hold policy rate steady in October: polls

All News 16:21 October 12, 2016

SEOUL, Oct. 12 (Yonhap) -- South Korea's central bank is likely to hold its key rate steady in October, polls showed Wednesday, as the government is seeking to support the country's economic growth amid rising household debts.

The Bank of Korea (BOK) is set to hold a monthly rate-review session on Thursday to decide whether to maintain or cut an all-time low rate of 1.25 percent. The BOK is also set to announce its estimates on growth outlook and consumer prices for this year and next year.

A recent poll conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency, showed that all 14 economists surveyed forecast the BOK to hold the key rate steady at the current record-low level for October.

Ma Tieying, an economist at DBS in Singapore, said South Korea's central bank could hold rates at 1.25 percent, noting that the latest data suggest that the growth outlook is basically in line with the BOK's projections.

"There is no compelling pressure for the BOK to further cut rates to support growth," Ma said.

Bank of Korea Governor Lee Ju-yeol said last week that the room to maneuver in monetary policy is "relatively limited," citing sharply increased household debt in Asia's fourth-largest economy.

Household debt reached an all-time high of 1,257.3 trillion won (US$1.11 trillion) as of the end of June due to record-low interest rates and strong demand for new apartments. It's one of the highest household debt levels in the world compared with income levels.

A separate poll showed 98 percent of 200 bond market experts surveyed said they expect the BOK to maintain its key rate unchanged in October.

The upcoming decision comes amid high expectations that the U.S. Federal Reserve could raise its interest rate one time within this year. Last month, the Fed maintained its target range for federal funds rate unchanged at 0.25 percent to 0.5 percent.

In July, the BOK said the local economy could grow 2.7 percent this year and 2.9 percent next year. It also said consumer prices could rise 1.1 percent and 1.9 percent this year and next year, respectively.


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